European Central Bank chief vows to keep hold on interest rates

Press Association

European Central Bank President Mario Draghi has underlined the bank's determination to stick with stimulus for the struggling eurozone, saying the bank will keep its benchmark interest rate the same or lower "for an extended period of time".

The statement followed a meeting of the bank's rate council which left the refinancing rate for the 17 EU countries that use the euro unchanged at 0.5%. Mr Draghi said the decision followed "an extensive discussion" on a potential rate cut.

Instead, in a marked departure of its usual stance of never pre-committing itself to targets, the bank offered an attempt at what is called "forward guidance".

The practice – already used by the US Federal Reserve – is designed to give more clarity about how long a central bank will continue its measures to stimulate the economy.

The Bank of England, now led by former Canadian central bank chief Mr Carney, said earlier that market pricing for future interest rate rises was "not warranted by the recent developments in the domestic economy".

Markets reacted dramatically on the banks' statements. In London, the FTSE 100 index of leading shares was up 3%, while Germany's DAX stock index was up 2.16%.

Meanwhile, the pound and the euro fell against the dollar.

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